How to Take Bias Out of Your Company’s Compensation Strategy

At Noun Project, we believe in being fair, transparent and inclusive with our employees regarding how their salary is determined. A company’s compensation strategy (or a lack thereof) is one of the clearest indicators of its values and culture, which is why we openly share the information used to calculate a salary for a position not only as part of a candidate’s job offer, but also for an employee’s entire tenure with our company.

A fair salary is a critical part of people’s lives, it’s how we take care of our own well-being as well as the well-being of our families and our communities. Over the years, we have put together the following processes to help us be as formulaic as possible with our salary decisions. In consistently using data-driven practices, we strive to take personal bias out of the equation.

We request input from our candidates and employees throughout the process to help us decide which factors should be part of the comp equation. Our data-based comp strategy is designed to keep internal parity on comp and prevent cases where the best negotiators receive higher pay.

Regarding how equity fits into this equation — It is advantageous for cash-strapped, early-stage startups to offer equity to make up for below market salaries as a way to extend their runway. Noun Project has been around since 2011 and is a profitable, self-sustaining company. We pay market rate salaries and offer equity on top — not instead of — fair comp.

Over the years, we have designed and iterated our compensation strategy around these key areas:

1. offer a salary rate that is competitive with the market
2. avoid personal bias
3. push for a process that is fair, transparent and inclusive

Our Process

Before posting an open position, we run a market salary report to get a salary range based on years of experience. Even though we hire remotely, we base all our salary comps on Los Angeles market rates, where our headquarters is based. Once we’re ready to make an offer to a candidate, we adjust the salary report based on their years of experience. We gather data from a variety of sources, using an aggregate of data points from Glassdoor, LinkedIn, Payscale, BuiltinLA, Comparably, and others. We include both salary and bonus information in our calculations. Once we aggregate all the data, we calculate the average and the median salary based on the information available to determine final compensation.

In our offer letter email to the candidate, we include three things:

• Offer letter outlining salary, equity, benefits, and start date.
• The full report of current salary market comps which was used to determine the salary for this role. At this point we ask the candidate to provide any other factors we should consider in our calculations.
• Overview of our company benefits and perks, including information on healthcare plans, paid family leave, holiday schedule, paid continued education, etc.

We have found this process to eliminate the need for most back-and-forth negotiations, simplifying the hiring process on both sides and setting the stage for the kind of transparency and culture the candidate should expect when they join our team.

Once the team member has been with the company for one year, and every year on their anniversary, we adjust their salary using an annual Cost of Living Adjustment (COLA) based on inflation rates. This annual process is done to ensure we pay fair compensation for every role, in a way that removes unconscious bias from the process. An employee’s salary is never adjusted down with the market, and during promotions we use the same data-driven market research process as we use during initial hiring to calculate the employees’ new salary.

Other Methods We’ve Tried

One of our company values at Noun Project is to continuously learn and improve our processes, products, our team and ourselves. Over the years, our comp strategy has gone through multiple iterations, and as we continue to grow and gain more information, we will continue to adjust and improve on this process as well. Here are a few of the things we have previously tried:

Asking Investors
Given how many companies investors interact with on a daily basis, most VC firms have access to some form of relative comp data. However, we’ve found that unless you work with a large VC firm with a dedicated HR and recruiting team, the comp reports get outdated fairly quickly.

Outsourcing Compensation Data
Over the years we have hired a handful of companies that provide comp data. The firms we’ve worked with had access to vast collections of seemingly relevant data, which we were able to parse by things like company size, location, job description and level. However, we have yet to find a resource as accurate as averaging out data from a multitude of publicly open sources. We found the data provided by comp firms to be on average lower than what we see out in the Los Angeles market, even when we’ve narrowed down their data to the LA region.

Why We Don’t Tie Compensation to Reviews

Once per year, everyone at Noun Project participates in 360-degree reviews. We believe it’s crucial for our growth as individuals, teammates, and as a company that these reviews allow for complete honesty and transparency. When as a company you tie giving comprehensive feedback to a person’s salary, you create a disincentive for open and honest communication.

Many companies provide larger raises to people who score well in performance reviews, and smaller or no raises to those who don’t. This is another way that salaries drift above and below market rates. At Noun Project, a person’s salary is not affected by their performance review. If you still have a job here, it’s because you’re doing a great job. If you’re doing an exceptional job and taking on more responsibilities, we’ll get you on track for a promotion and higher compensation, which will still be tied to market rates.

Marrying performance reviews to salary leaves room for unintended personal bias even with the best intentions. For example, if a supervisor knows that their employee’s husband is about to have extensive surgery, or that an employee is getting ready to have a baby, they may be reluctant to provide constructive criticism if that criticism can negatively affect the employee’s salary. Fellow peers who are reviewing the employee might do the same. And of course the employee themselves will be reluctant to have an open conversation about their flaws if they know it can negatively affect their compensation.

There’s no such thing as a perfect employee, because there’s no such thing as a perfect human. Everyone has something that they can improve on. Performance reviews are meant to improve performance, which cannot happen if there’s no room for an open and honest dialogue.

Although comp strategy is a critical part of any hiring process, it’s ultimately the culture and values of the company that keeps the team together for the long term. With a 96% employee retention rate, we are proud of the unrelenting commitment to our employee’s well-being that has enabled us to not only hire, but also retain the best talent.